Bad publicity, dropping market share and a controversial business partner. The 1990s were a turbulent time for Mercy Medical Center.

Jurors hearing Mercy’s civil trial against Aultman Health Foundation got a recap Tuesday of that recent history from Sister Judith Ann Karam, president and CEO of Sisters of Charity Health System, which owns Mercy.

Mercy accuses the tax-exempt Aultman Health Foundation and its subsidiaries — Aultman Hospital, AultCare and McKinley Life — of engaging in illegal and unfair business practices, including secretly paying select insurance brokers with charitable funds.

The Aultman defendants deny any wrongdoing and say Mercy suffered from its own mistakes.

SISTERS OF CHARITY

Karam testified in Stark County Common Pleas Court for more than five hours and was the only witness Tuesday.

She has led Sisters of Charity Health System since 1998. The Cleveland-based not-for-profit organization owns five hospitals and has assets of more than $700 million.

Karam said she first learned of Aultman Health Foundation’s conversion-support payments to brokers in 2004.

Between 1997 and 2002, patient volume at Mercy dropped precipitously, she said, although she didn’t have an exact number.

Mercy is claiming $110 million in damages, but any money awarded to Mercy in this case will stay with the hospital, Karam told the jury.

CROSS-EXAMINATION

Aultman argues that Mercy suffered financial setbacks because of its own mistakes, and Karam spent several hours on the stand answering questions to that point from Aultman attorney Allen Schulman.

He noted that since 1998, Mercy has changed its CEO three times and paid executive officers more than $2.2 million in severance.

Also, the hospital paid more than $21 million between 2001 and 2004 to Sisters of Charity Health System and then-partner University Hospitals Health System. When that partnership ended in December, Mercy was left with $85 million in debt.

But two of the main topics of Schulman’s cross-examination involved Mercy’s partial sale to Columbia/HCA Healthcare in 1995 and the decline of Ohio Health Choice, a managed-care network partially owned by Mercy.

COLUMBIA DEAL

Selling 50 percent of Mercy to for-profit Columbia was necessary to ensure that Mercy remained viable, Karam said.

Mercy remained a Catholic hospital with a charitable mission, and the partnership was approved by the Vatican, but the deal didn’t come without controversy, Karam said.

Mercy’s local board members were fired when they wouldn’t consider the deal, she said, and the Timken family requested that its name not be used in connection with the hospital, which had been called Timken Mercy.

The Columbia partnership also attracted a negative “60 Minutes” report.

Despite those issues, Mercy’s market share continued to grow until 1997, the same year Aultman Health Foundation started the conversion-support program, Karam said.

Schulman referenced a Mercy document from that same year mentioning concerns about the negative impact the Columbia partnership was having on the Sisters of Charity.

Karam said the image concerns didn’t correlate with usage of the hospital.

The Columbia partnership ended in 1999, when University Hospitals Health System became a part-owner of Mercy.

OHIO HEALTH CHOICE

Schulman also asked Karam about the decline of Ohio Health Choice. A Mercy report written in 2005 found that Ohio Health Choice had been important to Mercy’s financial success but started to falter in the mid-1990s, to the advantage of AultCare and Medical Mutual of Ohio.

Karam conceded that Ohio Health Choice, at one time, generated the most patients of any managed-care plan and that its strongest years were before the Canton sales office moved to Cleveland in 1996.

She also acknowledged that AultCare benefited from Aultman Hospital’s low costs.

But behind the scenes, she said, were the secret broker payments.

Schulman asked Karam if she knew that some of the same brokers who took conversion-support payments also represent Ohio Health Choice and Mercy-friendly insurance plans.

Karam said she learned that fact while preparing for the case, and that it caused her concern.

TRIAL RECAP

Tuesday was Day 10 of testimony in the civil trial between Mercy Medical Center and Aultman Health Foundation.

Sister Judith Ann Karam, president and CEO of Sisters of Charity Health System, was the only witness of the day. Sisters of Charity Health System owns Mercy.

Assigned to Stark County Common Pleas Judge Frank Forchione, the trial is scheduled to take two months. The Aultman defendants have yet to present their case.

At the beginning of Tuesday’s session, the judge dismissed an alternate juror whose child was ill. It was the second time Forchione has dismissed an alternate juror. Eight regular and four alternate jurors remain.

Most of Mercy’s claim centers on secret payments made by the Aultman Health Foundation to nine preferred insurance brokers starting in 1997.

Mercy says the payments diverted business to Aultman’s health insurance plans and Aultman Hospital, costing Mercy $60 million in business.

The Aultman defendants deny any wrongdoing, and accuse Mercy of pursuing a frivolous lawsuit.

The trial will continue Wednesday with testimony expected from Mercy’s chief financial officer, an AultCare executive and the former head of Aultman Health Foundation.

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